Gary Shilling has re-upped his bold forecast for oil to fall to $10 per barrel.
Members of the oil cartel OPEC and non-members who collectively pump out about half the world’s oil met in Doha, Qatar on Sunday to try to agree on production limits. The aim was to provide a boost to oil prices.
However, it all ended without an agreement, in part because Saudi Arabia was not willing to sign anything without Iran on board.
Shilling first made this call in an op-ed over two years ago.
And right after the failed producers’ meeting in Doha on Sunday, Shilling thought he’d remind us of where he sees oil going.
Right after the futures market opened on Sunday, West Texas Intermediate crude fell nearly 7% to about $37.61 per barrel. Prices recovered a bit on Monday.
Shilling explained his reasoning for this forecast in Business Insider’s latest ‘most important charts‘ feature.
He sent us a plot of OPEC versus non-OPEC production, which showed that non-OPEC countries have outpaced OPEC for at least the past two decades.
The idea is that after US shale producers started to threaten OPEC’s market share, the cartel, led by Saudi Arabia, went all out to boost production and see who could withstand cheap oil the longest.
His thesis is that the price that becomes completely unbearable is $10, which is the marginal cost of oil, or what it takes to produce one extra barrel.
NOW WATCH: Here’s Why Anybody Who Is Somebody In Finance Is Getting This Bottle Of Honey From Gary Shilling
Business Insider Emails & Alerts
Site highlights each day to your inbox.